What characterizes a situation where there is a surplus?

A situation characterized by a surplus occurs when the supply of a product exceeds the demand for that product. In this context, surplus indicates that there are more goods available than consumers are willing to purchase at the current price level.

When supply is greater than demand, businesses often face challenges, as they may have excess inventory that can lead to increased holding costs or necessitate discounting products to stimulate sales. This imbalance can also motivate firms to rethink their production strategies, adjust pricing, or find ways to attract more customers. Recognizing a surplus is crucial for businesses in order to make informed decisions about pricing, marketing, and inventory management.

The other options describe conditions related to demand or pricing strategies but do not accurately define a surplus situation. For instance, a scenario where demand exceeds supply represents a shortage, not a surplus, while selling products at a lower price could be a reaction to a surplus but does not define it. Similarly, price stability implies a balance between supply and demand, which contradicts the nature of a surplus.